'Toxic' politics could damage the US economy this year, UBS economist says

Data coming out of the U.S. were also reflecting that geopolitical tensions were causing economic damage, Carpenter told CNBC Tuesday.

“The retail sales number for December was just terrible,” he said. “We think at least part of it is the trade war with China disrupting various firms (and) disrupting people’s confidence – and when people get worried they tend to pull back. The January number was a little bit higher than maybe you would’ve hoped for, but the revisions (to the December figure) are truly troubling and it sets the year off to a really soft tone.”

The U.S. economy has slowed in recent months, with poor data and the ongoing trade war with China impacting market sentiment.

While a tight labor market is driving up wages, retail sales for December were much weaker-than-expected, job growth stalled in February, and the U.S. trade deficit reached a 10-year high in 2018 – despite the Trump administration’s attempts to shrink the gap by imposing tariffs on imports.

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